Marc Lasry’s $12.6 billion Avenue Capital Group has taken the unusual step of funding a deal in the public markets before it has even figured out what it wants to buy.

The New York-based hedge fund and private equity firm raised $220.5 million from investors last month for a “blank check” acquisition company called Boulevard Acquisition Corp (BLVDU.O). Demand for the deal was strong: Avenue had originally planned to raise just $150 million from investors.

Boulevard itself has no operations – just a pile of cash. Its mission is to find a troubled company in any industry, anywhere around the world, that it can acquire and turn around within two years. If it fails to do that, Boulevard will liquidate and return remaining cash to investors.

It is not the first time a big hedge fund or private equity player has pursued a deal through a blank-check company, also known as a special purpose acquisition company, or SPAC. For instance, the fast-food chain Burger King (BKW.N) was brought public in 2012 by merging with a SPAC called Justice Holdings, which was backed by hedge fund manager William Ackman.

But Avenue Capital raising a SPAC is unusual because it typically operates in distressed debt markets. It has never invested in or sponsored a blank-check company in the past. By doing so, the firm was able to raise money from investors who do not typically do business with Avenue, because they can’t invest in its other funds that tie up capital for years.

“It’s a way for traditional, long-only managers to participate in our space, because there’s no lock-up period,” said Stephen Trevor, who heads Avenue’s private-equity arm and spearheaded its SPAC plan.

In an interview, Trevor and Lasry said the Boulevard deal garnered far more interest from investors than they expected, and that Avenue is planning to do more and bigger SPAC deals in the future if this one goes well.

“This is a natural offshoot of what we do,” said Lasry.

Avenue’s foray into the SPAC market may also be a sign of froth. The market for such deals has opened up recently as stock valuations have soared. But SPAC investments are still considered high-risk, high-reward bets.

Blank-check IPOs were first created during the buyout boom of the 1980s. The industry was rife with fraud in the early days, and strict regulations briefly wiped them out of existence. The industry came back in the mid-2000s with structural changes and more disclosure, and raised a record of $10.8 billion in 2007, according to Thomson Reuters data. (Graphic: link.reuters.com/vem57v)

The financial crisis crushed SPAC issuance again, but so did poor performance.

Data from SPAC Analytics show that about 35 percent of the SPACs issued since 2003 have liquidated without finding a buyout target, while shares of those that completed a buyout produced an annualized return of negative 13.4 percent, on average.

Nonetheless, investors plowed $2.7 billion into SPACs globally last year, up from $327 million in 2012, according to Thomson Reuters data. Avenue Capital’s SPAC is one of three so far this year, and is the largest since Silver Eagle Acquisition Corp’s (EAGL.O) $325 million deal in July.

Investors are making a bet that Trevor’s experience in private equity will make Boulevard Acquisition Corp a diamond in the rough.

The 50-year-old executive spent much of his career at Goldman Sachs Group Inc (GS.N), where he worked in principal investing across energy, power, industrials and real estate in New York, Hong Kong and London. He also headed Morgan Stanley’s (MS.N) merchant banking business for about five years before joining Avenue Capital in 2012.

Boulevard’s February 14 prospectus says the company’s plan hinges on Trevor’s investing experience and professional contacts. In correspondence leading up to that filing, the U.S. Securities and Exchange Commission pressed Boulevard to make that risk clearer to investors.

Although there are no set criteria for Boulevard’s buyout, Trevor said he is looking for companies in what he calls “industries in transition.”

“We’re going to see a lot more deal flow than the typical sponsor of these vehicles,” Trevor said. “We’ve been approached by a number of companies that have said, ‘Boy, if I had $250 million it could help solve a lot of problems.'”

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